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The Libs' Big Fib

They say their astute management erased a huge NDP deficit. Wrong. And wrong.

By Murray Dobbin 5 May 2005 | TheTyee.ca

Murray Dobbin is an author, commentator and journalist. He is the author of five books and is a former columnist with Financial Post and Winnipeg Free Press. He is a board member of Canadians for Tax Fairness and on the advisory council of the Rideau Institute. He lives in Powell River, BC.

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There's no lie like a Big Lie. And as happens so often in politics in this country, the big lies -- those repeated over and over again -- pay big dividends. This has seldom been more true than the current election and the fact that the BC Liberal's whole campaign rests on the lie that 1) they inherited a huge deficit from the NDP and 2) that through tax cuts and excellent economic management Gordon Campbell turned things around and saved the province.

First, the foundation for all of the Liberal's propaganda: the NDP deficit myth. Rather than hand the Liberals a huge deficit requiring severe cuts to public services, the NDP in its last year in office, 2000-2001, racked up the largest surplus in BC history to that date - a total of $1.56 billion. The previous year, the NDP had a surplus of $150 million.

When he won in 2001, Gordon Campbell faced a problem: that pesky surplus would put pressure on him to spend on social programs. Better, in the odd logic of right-wing neo-liberals, to face a fiscal crisis, a deficit crisis. What better way to rationalize the most vicious cuts to social spending and environmental protection the province had ever seen?

How do you create a fiscal crisis? Simple. Take over $2 billion dollars of government revenue and burn it - or, even better, give it away in tax cuts to your friends. BC's largest corporations got a huge whack of tax cuts and so did BC's wealthiest residents.

Unbalanced tax cuts

Campbell's cuts were some of the most unfair ever seen in Canada with the wealthiest 11,000 British Columbians (those making over $250,000) taking home 15.2 percent of the total tax cut pie, about as much as the million people who make up bottom half of all tax payers earning $30,000 or less.

The made-to-order deficit crisis set the province up for the enormous cuts to services. Campbell had actually campaigned on such cuts in the 1996 election, deluding himself that British Columbians actually wanted to see their schools and hospitals closed and bathrooms taken out of their campgrounds. This time around he simply lied: the agenda hadn't changed, but his election strategy had.

While the economic cycle would have led to a deficit regardless of Liberal cuts, because of the tax cuts and the devastating economic impact of the spending cuts, the deficit in the Liberals' first year in office was a staggering $2.6 billion - dwarfing the highest NDP deficit in 1998-99 of just under one billion dollars. The next year was even worse - $2.68 billion in the red. In the third year - a third huge deficit in a row. By any accounting, this was the most fiscally incompetent and economically reckless government the province had ever had.

Deficit? Who cares?

But going by the headlines, it was almost a non-event. The pundits, editorialists and the Fraser Institute who were in a constant state of agtitation and near hysteria over NDP deficits were suddenly mute. Deficit? What deficit? In fact, this is always the response of the right - deficits racked up by giving tax breaks to the wealthy are okay; those created by spending on social programs (that is, on working people and the poor) are to be demonized.

By this convenient theory, tax cuts drive investment and economic growth. And while you don't hear the Liberals repeating their earlier line that the tax cuts would "pay for themselves" you do hear that we now have big surpluses because the Liberals are such good economic managers. Neither claim stands up to even the most cursory examination.

This past year personal income tax revenue - which was supposed to go up as a result of the tax cut economic stimulus - was actually below what was taken in the last year the NDP was in power - $883 million less. Revenue from corporate taxes have not returned to their pre-cut levels either.

So where did the $1.74 billion surplus come from? Brilliant economic management by the Liberals? Well, no, actually - it came from the federal government in increased "transfer payments," the money BC gets for medicare and education plus federal equalization payments, due to BC's current status as a "have-not" province. This last fiscal year saw the province get a whopping $2.1 billion more from Ottawa than they did in 2000-2001.

The Liberals’ shadow deficit

If the Liberals hadn't received that extra two billion, and had not cut spending, their surplus would instead have been a deficit of $360 million.

But it gets worse. If Campbell hadn't increased tuition fees and MSP premiums the deficit would have been a billion dollars higher yet. Now we're up to $1.4 billion in the red, giving the Liberals the dubious distinction of being able to claim four of the highest deficits in BC history - in four years of governing.

Maybe you knew all this stuff. But if you think you are immune from the Liberal's feel good messages on the economy, answer this question: which government in the last year of its term had the highest economic growth rate? Answer: The NDP with a rate of 4.6 percent in 2000-2001, compared to the Liberals, last year, at 3.9 percent. Who would have thunk it?

Murray Dobbin's 'State of the Nation' column appears twice monthly on The Tyee.  [Tyee]

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